New 2% Deposit Mortgage: A Real Step Forward for First-Time Buyers?

Feb 03, 2026·By Matthew Pigrome

A major development in the UK mortgage market today has the potential to reshape how first-time buyers access homeownership. A leading high-street lender has launched a mortgage that lets first-time buyers secure a home with as little as a 2% deposit — a significantly lower barrier than the traditional 5% deposit most lenders expect.

What’s New: A 98% Loan to Value First-Time Buyer Mortgage

The lender’s new “My First Mortgage” product offers:

Up to 98% loan-to-value (LTV) — meaning just a 2% deposit is needed.
Five-year fixed interest rate — currently priced around 5.19%.
No product fee and a £250 cashback incentive on completion.
Maximum borrowing up to £500,000.
Minimum £10,000 deposit required — so effectively the 2% is available on higher-value properties.

This is the first time one of the UK’s largest lenders has brought a product to market with a deposit requirement this low — signalling a shift in product availability after many years of tighter requirements.

Why This Matters for Aspiring Homeowners

Saving for a deposit remains the biggest hurdle for many would-be buyers. Research from the lender suggests the typical first-time buyer deposit exceeds £80,000 — a figure far out of reach for many households, especially amid higher living costs and rents.

A product that brings the deposit requirement down to 2% could, in theory, reduce the time spent saving by several years for some buyers, potentially unlocking ownership for those stuck renting longer than they’d planned.

Important Considerations Before You Apply

While this product may headline a “2% deposit”, it’s crucial to unpack what that means in practice:

Minimum deposit condition: You still need at least £10,000 saved — so the real percentage can vary based on property price.
Affordability and stress testing: Full affordability checks still apply, and lenders will assess income, outgoings, and loan-to-income multiples.
High LTV risks: Very high loan-to-value borrowing means smaller equity cushions. If house prices move sideways or down before your mortgage term ends, you could be in a negative-equity position. Expert brokers caution this is a real risk with ultra-low deposit lending.
Exclusions: This particular product isn’t available for all property types (e.g. some new builds) and excludes applicants in parts of the UK such as Northern Ireland.

How Mortgage321 Can Help First-Time Buyers Navigate This Opportunity

Low-deposit mortgages are a welcome addition to the market — but they must be approached with specialist advice to ensure long-term affordability and financial safety. At Mortgage321, we support first-time buyers with:

Tailored affordability modelling, including true cost of ownership (payments, fees, insurance, and future remortgage scenarios).
Comparative product analysis across mainstream and niche lenders — including low-deposit, guarantor, family-deposit and shared-ownership-linked options.
Planning for long-term equity building, such as how overpayments or remortgaging strategies can strengthen your position before the fixed term ends.
Navigating eligibility, including income multiples, credit histories and any lender restrictions.

What This Means for the Market

This new product reflects a broader trend among UK lenders exploring higher loan-to-value lending, often alongside government-linked 95% schemes that support small deposits.

However, accessibility and risk management remain at the forefront for brokers and buyers alike. Products with ultra-low deposit requirements should be balanced against personal financial resilience — and always underpinned by independent advice.

Ready to explore if a 2% deposit mortgage is right for you?

Contact the expert team at Mortgage321 on 01255 440142 or email [email protected] for a personalised assessment and mortgage strategy that aligns with your financial goals and property ambitions.

Disclaimer - The content of this blog post is provided for general information purposes only and does not constitute financial, legal, tax, or professional advice. While every effort has been made to ensure the accuracy of the information at the time of publication, Mortgage321 and its contributors make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the information contained in this article.

Mortgage products, criteria, rates, and regulations are subject to change, and individual circumstances can significantly impact the suitability of any mortgage solution. Readers should not rely solely on the content of this blog when making decisions relating to mortgages or property financing. You should seek tailored advice from a qualified mortgage adviser based on your personal financial situation and requirements.